Despite a $3 million to $4 million projected loss in revenue this year due to the ongoing coronavirus pandemic and an unbalanced budget heading into 2021, Solon’s administration is supporting a pay raise for employees not covered under a collective bargaining agreement.
An up to 2.5 percent raise is already built into the union contracts for this year.
The pay raise of up to 2.5 percent, which will be subject to City Council approval, was part of the discussions during last week’s budget hearings, which wrapped up Monday.
The budget will go through the three-reading process with adoption expected later next month and become effective Jan.1.
“I struggled with wage increases, (but) decided I will give them this year,” Mayor Edward Kraus said. “I couldn’t justify how hard everyone worked and saying to them after all the work and effort they gave in 2020, that they wouldn’t get a raise.”
The pay increase for the roughly 130 employees will equate to an expenditure of about $235,000.
“It was a way to say to our employees how much they are valued,” Mayor Kraus said.
Mayor Kraus continued that in opening the budget hearings that when the pandemic hit in March and into April, “the numbers we were seeing were devastating.”
Officials had originally projected a revenue loss of about $7 million.
“No one predicted what we faced this year,” Mayor Kraus said.
Instead, that loss will amount to about $4 million, with an operating deficit of $3 million for this year. With the proposed 2021 budget, an operating deficit of $843,000 is projected.
A total general fund budget of $44 million is projected for next year, which is 3.9 percent lower than this year.
Revenues are estimated at $43.2 million and a capital plan amounting to a total of $23.9 million is recommended.
To offset this year’s projected deficit due to this year’s pandemic, Finance Director Matthew Rubino recommends the city dip into its budget stabilization, or rainy day fund, which has a total of $7.5 million currently.
“2021 should be our last difficult year,” Mr. Rubino said. “The expectation is we can build toward a structural balance in 2022.”
Mayor Kraus outlined major mitigation amounting to about $3 million that took place to offset the loss “and that helped us a lot getting into this year.”
Mayor Kraus said it was a difficult decision to do such things as cancel all the events for the city’s bicentennial, as well as the annual July 4 fireworks display and Home Days, among other events.
A hiring freeze that was also part of the mitigation “was critical,” the mayor said, and saved the city $400,000f by not hiring or filling positions that were retiring.
“We achieved savings through attrition,” Mayor Kraus said. “That saved us.”
That freeze will carry on into 2021, he added.
Department heads cut their budgets “down to the bone,” Mayor Kraus continued, and the city also put a hold on major capital projects planned for this year to achieve the budget mitigation goals.
He had two “guiding principles” in 2020, he said.
“I couldn’t have lived with myself if we had to cut or furlough full-time staff,” he said. “The second thing is I could not settle for any deterioration of our city services.
“That is why people move here,” he added.
Instead of an originally projected general fund revenue of $38.5 million heading into 2021, the city is at $41.2 million. In a normal year, the city averages about a $45 million in general fund revenue.
Despite the picture looking better than originally expected, 2021 will still be a year of holding the line, Mayor Kraus said.
“We can’t go on a spending spree and go back to normal,” he said. His goal is that the city’s full-time staff stays in tact in 2021, he said, and there will be no diminishing of services.
“We will continue with our hiring freeze,” he said. “We’re just going to have to bite the bullet now.”
Depending on where things stand with the pandemic and the possibility of a vaccine, the mayor said he may try to bring back Home Days next year as well as hold a couple bicentennial events.
The city will also continue moderation of overtime and will defer capital costs to 2022 and 2023 as well as limit transfers from the general fund.
“We did a good job in 2020 but we have to continue it in 2021,” he said.
Heading into 2021, there will also be a change in the employee’s contribution with healthcare, Mr. Rubino explained.
It had been 5 percent for many years, which is “unheard of,” Mayor Kraus said.
He proposed a slight modification for next year to 7.5 percent.
“I felt if I am going to be able to give wage increases, I think it’s time we address individual contributions to healthcare,” he said. At 7.5 percent, Solon is still far below many communities in Northeast Ohio, he added, many of which are at 10-15 percent.
This change will offset about $112,000 a year in costs to the city, Mr. Rubino said, noting this is just for non-union employees. Adding the union workers will double that amount, he said. That change for union employees will be part of contract negotiations and not happen until 2022.
In the area of income tax, Mr. Rubino said they are projecting about $41.3 million “which is good news.” The withholding is stable, he said.
Mr. Rubino said that overall there will be a “partial recovery” heading into 2021. “The impacts will linger.”
Councilman Robert N. Pelunis asked, in light of the ongoing pandemic and the revenue loss that has resulted, why the city is considering a pay raise.
“Employee morale is critical,” Mayor Kraus said. “I want to be able to reward our employees.
“We have a lot of employees who don’t make a lot of money and they rely on these wage increases,” the mayor continued. “Just a simple 2.5 percent (is) a thank you for the effort and work they put in. You have to thank the employees. They are the ones who provide the services.”
Mayor Kraus said the wage increase is already built into the union contract. To say to those not covered under a union contract that they won’t get it “is not something I’m prepared to do.”
Mr. Rubino noted that the hiring freeze is double the savings of a wage increase.
Mr. Pelunis said he is not in favor of cutting services.
“We have to keep eye on general fund (because) if we have a longer recovery or the pandemic is longer than expected, I want to make sure we are protected in future,” Mr. Pelunis said.
Mayor Kraus said the city is blessed to have a rainy day fund, as many communities are having to cut staff and deplete services.
“When it rains, you use the rainy day fund, and clearly it was raining in 2020,” he said.